Transferring ownership can be a complicated process involving many steps, from signing a contract to preparing closing documents. To transfer property ownership, one needs to fill out, sign, and notarize a deed. Among the most commonly used instruments are grant deeds and quitclaim deeds.
With a warranty deed, you can transfer property ownership in whole or in part without contracts, closing statements, mortgage payments, title insurance, etc. Examples include:
- Transfers between ex-spouses during/after divorce
- Gifting property
- Where the parties have a good understanding of each other
These transactions are not subject to closing, foreclosure, title insurance, etc., and only require legal documentation to prove the transfer. The two parties handle financial considerations between themselves.
Types of Property Transfer
While alive, you can voluntarily transfer or grant any interest in real estate property in three ways: by will, by gift, or by relinquishment. Transferring property ownership essentially involves a Bill of Sale — a document representing a contract that stipulates an exchange of property.
Transferring property by will
Property can be transferred in three ways after your death: by will, descent (if there is no will), or escheat (when there is no will and no heirs). In the case of death, the will becomes a means to property transfer. If the beneficiary accepts the terms of the will and accepts the property as written, full rights may be assigned.
Transferring property by gift
Gifting is another way to transfer property. An in-kind transfer is distinguished from a sale because the donor does not receive the full consideration in return for the gift. Families frequently share ownership, and the transfer must also be witnessed or notarized. Giving to charity also falls under this kind of transfer.
Transferring property by relinquishment
While not explicitly defined as a property transfer, relinquishment of property rights can also be valid manner of transferring property. You will still need a notary or a witness document that relinquishes your title to a property. Regulations vary from state to state.
How Does Property Transfer Work?
Suppose you want to transfer property ownership to someone else. In that case, you can use either a quitclaim deed or a warranty deed. Here is a brief review of these two terms:
Quitclaim Deed
In this type of deed, the grantor (seller) transfers all ownership interests in the property. However, it does not guarantee that the title is good or that the property is not owned by anyone else. A quitclaim deed says: "I want to convey my property interest to you, but I'm not guaranteeing the title."
Warranty Deed
A legal guarantee is included with this property transfer. You, the seller, may transfer ownership of the property, and it specifies that there is no other owner. Also, the document asserts that the property is free of debts and liens. A warranty deed states: "I certify that the property is my own, and it has a good title."
Property sales use warranty deeds. These deeds safeguard buyers against title challenges. Unlike quitclaim deeds, warranty deeds don't involve unpaid taxes or creditor liens.
Steps for a Smooth and Successful Property Transfer
You'll need to fill out two forms found at your county recorder's office. These include the quitclaim deed form. Including information about your home's value, location, property description (dimensions and boundaries), and the preliminary ownership transfer form.
- Meet with the new owners to discuss the deed: the parties will clarify their tenancy rights here. How will the tenancy be structured? Is it a joint tenancy or a tenancy in common? It is common for family members to hold properties as joint tenants with survivorship rights to avoid expensive probate costs in the future.
- Prepare the deed with the help of an attorney: An attorney can guide you through this process and ensure that the deed is accurate. It includes personal information about you and the individual to whom you're transferring the title. You can use the description in your original deed or the government plans if you have access to them.
- Go over the deed: Verify that all information in the deed is accurate and complete. Please make sure the sellers and buyers have provided their full legal names and addresses and verify the legal description. The form will include blanks for signatures, but do not sign them yet.
- Present the deed to a notary public and a witness: Sign the deed before a notary public qualified in your state and another witness. Notarize it with a signature and seal. Buyers don't need to sign.
- Publicly record the deed: Taking the deed to the local county recorder's office completes the property transfer. It is called "recording the deed," and not following through with this step can cause problems because no one will know what your relative is entitled to. There may be fees and taxes involved. After the closing, the county should have the buyer listed as the new owner.
Transfer Property Tax by State
A property transfer tax is based on the selling price of the property being transferred, and the amount differs from state to state. It can be as low as $2 in Arizona or a percentage of the sale price that exceeds 2 percent.
Here is a table with some examples of states with transfer taxes and how much they tax. Included are examples of totals with county rates and city rates as well:
| State | Transfer Tax | Total Transfer Tax per $100,000 of Property Value |
|---|---|---|
| California | County: 0.11% | $110 |
| Florida | State: 0.60%
Miami: +0.45% |
$600
$1,050 |
| Illinois | State: 0.10%
County: +0.05% Chicago: +0.30% |
$100
$150 $450 |
| New York | County: 0.40% - 1.40%
NYC: +1.00% - 2.625% |
$400 - $1,400
$1,400 - $4,025 |
| Ohio | State: 0.10%
County: +0% - 0.3% |
$100
$100 - $400 |
| Pennsylvania | State: 1.00%
Philadelphia: +3.278% |
$1,000
$4,278 |
| Texas | None | $0 |
As seen in the table, some states are more complicated than others, like New York where the tax rate depends on the type and value of the property.
While most of the states levy a property transfer tax when a property title changes hands, the 14 below do not have a state property transfer tax:
- Alaska
- Idaho
- Indiana
- Louisiana
- Kansas
- Missouri
- Mississippi
- Montana
- New Mexico
- North Dakota
- Oregon
- Texas
- Utah
- Wyoming
How Much Does It Cost to Transfer Property Deeds?
Fees are not waived just because you transfer your rights to a property. Here are some fees that you can expect in these types of transactions:
- Transfer tax: The county imposes a transfer tax on the property seller. Depending on your county, you may be charged 1% of the home's purchase price for real estate tax. The person taking over ownership may have to pay higher real estate taxes if the county reassesses your property's value at transfer.
- Deed preparation fee: The buyer pays the costs of drafting the title transfer document while the seller pays this fee at closing, but sometimes, the buyer does too.
- Title insurance: Sometimes, buyers purchase title insurance, which protects them from later issues with the home's ownership history. Title policies for new homeowners are also typically purchased by sellers, which cost between $500 and $1,000.
- Recording fees: The county recording office charges a fee for recording a deed. The fee will depend on the value of the property and the number of documents and pages. Buyers pay this fee upon purchase.
How Do I Transfer Property to A Family Member Tax-Free?
IRS policy imposes a gift tax on gifts to the family. Fortunately, the annual gift tax exclusion is $16,000 per person as of 2022, so if you and your partner do estate planning, you can transfer up to $32,000 in assets without triggering the gift tax. Individuals are limited to an estate tax exemption of $5.6 million and married couples to $11.2 million.
As of 2021, the estate tax exemption stood at $11.7 million. There is no federal estate tax on inheritances up to that amount. If you are married, your spouse is entitled to an exemption of $11.7 million.
Transferring ownership can be a complicated process involving many steps, from signing a contract to preparing closing documents. To transfer property ownership, one needs to fill out, sign, and notarize a deed. Among the most commonly used instruments are grant deeds and quitclaim deeds.
With a warranty deed, you can transfer property ownership in whole or in part without contracts, closing statements, mortgage payments, title insurance, etc. Examples include:
- Transfers between ex-spouses during/after divorce
- Gifting property
- Where the parties have a good understanding of each other
These transactions are not subject to closing, foreclosure, title insurance, etc., and only require legal documentation to prove the transfer. The two parties handle financial considerations between themselves.
Types of Property Transfer
While alive, you can voluntarily transfer or grant any interest in real estate property in three ways: by will, by gift, or by relinquishment. Transferring property ownership essentially involves a Bill of Sale — a document representing a contract that stipulates an exchange of property.
Transferring property by will
Property can be transferred in three ways after your death: by will, descent (if there is no will), or escheat (when there is no will and no heirs). In the case of death, the will becomes a means to property transfer. If the beneficiary accepts the terms of the will and accepts the property as written, full rights may be assigned.
Transferring property by gift
Gifting is another way to transfer property. An in-kind transfer is distinguished from a sale because the donor does not receive the full consideration in return for the gift. Families frequently share ownership, and the transfer must also be witnessed or notarized. Giving to charity also falls under this kind of transfer.
Transferring property by relinquishment
While not explicitly defined as a property transfer, relinquishment of property rights can also be valid manner of transferring property. You will still need a notary or a witness document that relinquishes your title to a property. Regulations vary from state to state.
How Does Property Transfer Work?
Suppose you want to transfer property ownership to someone else. In that case, you can use either a quitclaim deed or a warranty deed. Here is a brief review of these two terms:
Quitclaim Deed
In this type of deed, the grantor (seller) transfers all ownership interests in the property. However, it does not guarantee that the title is good or that the property is not owned by anyone else. A quitclaim deed says: "I want to convey my property interest to you, but I'm not guaranteeing the title."
Warranty Deed
A legal guarantee is included with this property transfer. You, the seller, may transfer ownership of the property, and it specifies that there is no other owner. Also, the document asserts that the property is free of debts and liens. A warranty deed states: "I certify that the property is my own, and it has a good title."
Property sales use warranty deeds. These deeds safeguard buyers against title challenges. Unlike quitclaim deeds, warranty deeds don't involve unpaid taxes or creditor liens.
Steps for a Smooth and Successful Property Transfer
You'll need to fill out two forms found at your county recorder's office. These include the quitclaim deed form. Including information about your home's value, location, property description (dimensions and boundaries), and the preliminary ownership transfer form.
- Meet with the new owners to discuss the deed: the parties will clarify their tenancy rights here. How will the tenancy be structured? Is it a joint tenancy or a tenancy in common? It is common for family members to hold properties as joint tenants with survivorship rights to avoid expensive probate costs in the future.
- Prepare the deed with the help of an attorney: An attorney can guide you through this process and ensure that the deed is accurate. It includes personal information about you and the individual to whom you're transferring the title. You can use the description in your original deed or the government plans if you have access to them.
- Go over the deed: Verify that all information in the deed is accurate and complete. Please make sure the sellers and buyers have provided their full legal names and addresses and verify the legal description. The form will include blanks for signatures, but do not sign them yet.
- Present the deed to a notary public and a witness: Sign the deed before a notary public qualified in your state and another witness. Notarize it with a signature and seal. Buyers don't need to sign.
- Publicly record the deed: Taking the deed to the local county recorder's office completes the property transfer. It is called "recording the deed," and not following through with this step can cause problems because no one will know what your relative is entitled to. There may be fees and taxes involved. After the closing, the county should have the buyer listed as the new owner.
Transfer Property Tax by State
A property transfer tax is based on the selling price of the property being transferred, and the amount differs from state to state. It can be as low as $2 in Arizona or a percentage of the sale price that exceeds 2 percent.
Here is a table with some examples of states with transfer taxes and how much they tax. Included are examples of totals with county rates and city rates as well:
| State | Transfer Tax | Total Transfer Tax per $100,000 of Property Value |
|---|---|---|
| California | County: 0.11% | $110 |
| Florida | State: 0.60%
Miami: +0.45% |
$600
$1,050 |
| Illinois | State: 0.10%
County: +0.05% Chicago: +0.30% |
$100
$150 $450 |
| New York | County: 0.40% - 1.40%
NYC: +1.00% - 2.625% |
$400 - $1,400
$1,400 - $4,025 |
| Ohio | State: 0.10%
County: +0% - 0.3% |
$100
$100 - $400 |
| Pennsylvania | State: 1.00%
Philadelphia: +3.278% |
$1,000
$4,278 |
| Texas | None | $0 |
As seen in the table, some states are more complicated than others, like New York where the tax rate depends on the type and value of the property.
While most of the states levy a property transfer tax when a property title changes hands, the 14 below do not have a state property transfer tax:
- Alaska
- Idaho
- Indiana
- Louisiana
- Kansas
- Missouri
- Mississippi
- Montana
- New Mexico
- North Dakota
- Oregon
- Texas
- Utah
- Wyoming
How Much Does It Cost to Transfer Property Deeds?
Fees are not waived just because you transfer your rights to a property. Here are some fees that you can expect in these types of transactions:
- Transfer tax: The county imposes a transfer tax on the property seller. Depending on your county, you may be charged 1% of the home's purchase price for real estate tax. The person taking over ownership may have to pay higher real estate taxes if the county reassesses your property's value at transfer.
- Deed preparation fee: The buyer pays the costs of drafting the title transfer document while the seller pays this fee at closing, but sometimes, the buyer does too.
- Title insurance: Sometimes, buyers purchase title insurance, which protects them from later issues with the home's ownership history. Title policies for new homeowners are also typically purchased by sellers, which cost between $500 and $1,000.
- Recording fees: The county recording office charges a fee for recording a deed. The fee will depend on the value of the property and the number of documents and pages. Buyers pay this fee upon purchase.
How Do I Transfer Property to A Family Member Tax-Free?
IRS policy imposes a gift tax on gifts to the family. Fortunately, the annual gift tax exclusion is $16,000 per person as of 2022, so if you and your partner do estate planning, you can transfer up to $32,000 in assets without triggering the gift tax. Individuals are limited to an estate tax exemption of $5.6 million and married couples to $11.2 million.
As of 2021, the estate tax exemption stood at $11.7 million. There is no federal estate tax on inheritances up to that amount. If you are married, your spouse is entitled to an exemption of $11.7 million.
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